The large and growing US current account deficit has its counterpart in the large and growing current account surpluses in Asia and in the major oil-exporting countries. Although Europe is not part of the problem of global imbalances, Europeans are concerned that a disproportionately large...

Geldmengensteuerung mit stochastischem Geldmengenziel Die amerikanische Geldpolitik der letzten zehn Jahre ist durch zwei herausragende Ereignisse geprägt. Nach einigen Jahren des Versuchs der Geldmengensteuerung über kurzfristige Zinsziele ging das Federal Reserve Board im Oktober 1979 zu...

We present a framework of investigation into the political economy of the budget process. Our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion. Empirical evidence supports that proposition. The choice of rules depends on...

This Policy Brief was adapted from a paper written by the three authors and presented by Bruegel Director Jean Pisani-Ferry at the informal ECOFIN Council meetings in Gothenburg, Sweden, on 1 Oct. In the brief, the authors argue that bank recapitalisation and restructuring should be a matter of...

In response to the financial and economic crisis, central banks, unlike in the 1930s, have created enormous amounts of money. There are fears that this will lead to inflation, but it is base money (the central bank's liabilities) that has expanded; total monetary aggregates have not. By contrast,...

Senior Non-Resident Fellow Jürgen von Hagen offers his recommendations for the proper monetary policy to lead the eurozone out of the crisis. He argues that the tentative recovery in the euro area indicates that both monetary and fiscal policy can be normalised soon. However, because delaying...

Variance of exchange rates around predictions can be from 1) undiscovered fundamentals, 2) efficient markets, 3) destabilising speculation, or 4) regime and personality differences in the heuristics used in the stage of evaluating alternatives. Field and experimental evidence identifies 4) as...

Conclusions favorable to flexible exchange rates typically accord with expected utility theory in ignoring the costs that exchange rate uncertainty generates for governments, central banks, firms and unions in: (i) choosing among acts; and (ii) existing until learning the outcome of the chosen...

In the decision-making process, there is a stage when choosers evaluate alternatives. Evaluation is complex especially when it involves the future exchange rate. In the complexity of predicting the future exchange rate, choosers may use prominent numbers and ratios. We furnish field and...